Money Mondays: When Disaster Strikes

What should we be thinking about if we are impacted by a natural disaster?

As we watch the remnants of Hurricane Matthew swirl off the Atlantic Coast, I was thinking of those who were impacted by Katrina, and Sandy, and other events that have impacted great numbers of people in our country. Thankfully, Matthew does not seem to have caused the damage that it could have, but there are still those who will return to damages to their homes or valuables. Today, I want to talk about some of the things to remember in the event you or your loved ones are affected by a natural disaster, and talk about what the short-term and long-term economic impacts of disasters look like.

Great. Let’s first start with those impacted by Hurricane Matthew? Where should they start?

If you have been impacted by this hurricane, the first thing you need to do is file your insurance claims. And do it now! Take the necessary pictures and fill out only the bare minimum documentation you need. Do not wait to get all of your paperwork in order, because insurance claims are handled on a first-come, first-served basis. You will have time to assemble the proper documents after you submit the claim. Also, those first in line generally encounter fewer hurdles from their insurance company, so it helps to act fast.

You should also work to get repair estimates before your insurance adjuster arrives. This can help them to be more realistic about their figures. Finally, keep receipts for everything from food to lodging for the recovery period, as you may be able to have these costs reimburses through your insurance or other channels. If you have uninsured property losses, you should contact the Federal Emergency Management Agency. FEMA can assist uninsured residents with immediate shelter needs and also in the rebuilding process.

In the longer term, you need to review your insurance needs! While these events are rare, in recent years events like Hurricane Sandy have shown that they do happen, so it is imperative to have insurance.

What should consider when reviewing our insurance needs?

The important thing, once you have filed your claims or worked with relief agencies to make arrangements, is to review your coverage to ensure that it is adequate. For example, if you have made improvements to your home, or the value has gone up, you want to consider increasing your coverage. Also, think about what disasters can impact you. For example, standard homeowners’ policies generally cover wind damage, but not flooding. A few years ago in Colorado, many residents were not covered because they did not realize they lived in a flood zone, or they simply believed it could not happen to them. So you might consider purchasing insurance for unlikely events, like floods, even if the chances of this happening are very small.

You also need to review your deductibles for these disasters. Many insurers now require homeowner’s insurance policies that have percentage deductibles for these events rather than traditional dollar deductibles that you might pay for something like theft. And since percentage deductible policy is based on the home’s insured value, your deductible could change dramatically if you increase coverage.

What happens in the wake of these disasters? Should consumers worry about insurance rates going up significantly

In terms of insurance costs, it’s unlikely that they will be rise much because these events are expected in the southeastern United states. However, with climate change and other factors causing concern about increasing frequency and strength of storms, to say nothing of sea level rise, rates could creep up over the longer term. This is also true for flood insurance, and homeowners insurance in places prone to other extreme weather events. In terms of rebuilding, federal funding plays a big role in the rebuilding, particularly in areas designated as federal disaster areas. The Federal Emergency Management Agency covers 75 percent of the cost of repairs in areas designated for relief efforts, with the state or local government picking up the remaining 25 percent.

How do these events impact economies?

They are actually a mixed bag. For Hurricane Matthew, projections ran from $25 billion in damage to $70 billion. It is likely to be closer to the lower end because it didn’t make landfall, thankfully. But hurricanes typically don’t harm a nation’s economic growth. And much of the losses in the region are later offset. Most damaged homes, businesses and infrastructure are repaired or rebuilt, generating economic activity. And at least some of the disruptions to retail and other businesses are made up in the following weeks and months as consumers release pent-up demand.

We saw this play out in the wake of Sandy. Car sales increased 14 percent over the same month a year later as people replaced ruined automobiles, and rebuilding efforts drove the construction industry in New York, boosting employment in New York State’s construction industry 1.3% higher than the previous year.

While we never want these disasters to happen to anyone, rebuilding after these events can have silver linings.